Aluminum futures in Shanghai rose to the highest in three weeks on production cuts and speculation that the Chinese government may buy the metal to boost strategic reserves and help producers amid an economic slowdown. China’s Sichuan Aostar Aluminum Co. closed all its 250,000- metric ton capacity as prices slumped on weak demand, the company said today. Aluminum output worldwide fell 6.7 percent in November from a month earlier as production dropped to a 19-month low in China, the world’s largest supplier, according to the International Aluminum Institute. “Evidence of more production cuts worldwide bolstered prices,” Li You, an analyst at Minmetals Starfutures Co. said by phone from Shenzhen today. Shanghai aluminum also rose on speculation of state buying, Li added. Aluminum for March delivery advanced as much as 2.6 percent to 11,210 yuan ($1,637) a ton on the Shanghai Futures Exchange, the highest intra-day price since Dec. 4. The contract traded at 11,085 yuan at 10:48 a.m. local time. The metal rose 0.3 percent to $1,565 on the London Metal Exchange after yesterday gaining to the highest since Dec. 4 China’s State Reserve Bureau may buy about 1 million tons of aluminum from producers over three months in early 2009, Minmetal’s Li said. China would increase reserves of “important” raw materials the Ministry of Industry and Information Technology reiterated last week. Officials from the state-controlled SRB, which holds reserves of commodities to regulate supply, were not immediately available for comment today. Among other LME-traded metals, copper was unchanged at $2,870 a ton, zinc added 0.2 percent to $1,160 and lead rose 2.2 percent to $885.

Source